BEA in the 1940s

Ed. Note: This post is part of a series following the release of
the 1940 Census[9] highlighting various Commerce agencies and their hard work on behalf of the American people during the 1940s through today.

As the U.S. population has changed dramatically since 1940, so too has the U.S. economy. Just a few years prior to the 1940 Census, in 1935, employees of the Department of Commerce[10] and the National Bureau of Economic Research[11] created what we call the National Income and Product Accounts (NIPA), a comprehensive set of economic accounts for the nation that provides unparalleled insight into the workings of our economy.

Let’s take a quick glance at the NIPAs and see how things have changed over the last 72 years. One commonly used measure of standards of living is GDP per capita—the total output of the nation divided by the population. Looking to national accounts table 7.1[12], we see that in 1940 U.S. GDP per capita was $8,824 in inflation-adjusted dollars. By 2011, it had increased nearly fivefold to $42,671. Over that period, the structure of the economy changed with services accounting for an ever increasing for spending. In 1940, consumer spending on services (everything from haircuts to heart surgery), according to NIPA table 1.1.10[13] accounted for 30 percent of GDP. By 2011, it was 47 percent—nearly half of economic activity.The way we measure the economy has also changed in significant ways. Since the early days of the NIPAs, when the focus was on providing information to guide policy decisions during the Great Depression, the accounts have continued to evolve in response to the pressing needs of the nation. As the U.S. entered World War II in 1941, military spending and investment was expanding dramatically, from $2.5 billion in 1940 to $84.2 billion in 1943 according to NIPA table 3.9.5[14]. At the time, there was a need to understand the emerging capacity of the U.S. economy to produce the goods and services needed for the war effort.Could the U.S. economy produce the tanks, planes, and other goods needed to support the war? War planners needed a measure of final output—the goods and services produced by the economy—as a means to understand the capacity of the economy to produce the goods and services the war effort demanded. They also needed this information in as close to real time as it could be produced. This was the start of some of the key economic indicators we all still follow closely today.

The Bureau responded by expanding the analytical capabilities of the NIPAs and created a single national-level aggregate that described the size and output of the economy and how it changed quarter to quarter. The first annual estimates of gross national product (GNP) were published in May 1942, with quarterly estimates added that August. The May 1942 Survey of Current Business[15] (PDF) featured the first GNP estimates. The Bureau has continued to publish GNP and GDP estimates ever since.